OECD figures show public benefits more than individuals from tertiary education

The Australian public, not individuals, profits most from higher education but students shoulder most of the cost, according to international figures that undermine the government's claim that students should pay more because they benefit most.

The public rate of return from tertiary education in Australia is twice the rate of return to the individual, a Fairfax Media analysis of figures from the Organisation for Economic Co-operation and Development shows. The data measures the return on investment based on taxes and other financial benefits.

Australia bucks the international trend as one of only five OECD countries where the public profits at a higher rate than the individual. It ranks second out of 29 countries – behind only Britain – for the biggest benefit to the public, while in 24 countries the private rate of return outweighs or equals the public rate.

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Economist David Richardson from The Australia Institute says the OECD study "demolishes the claim" that higher education benefits individuals more than the public.

"The rest of society does get a hell of a lot of benefit out of educated people," Richardson said.

He said the OECD's analysis "only includes what governments can tax, which is a fairly narrow definition."

For example, the report doesn't quantify the economic benefits of critical thinking skills, deeper civic engagement and better health. He cited a 2001 OECD study that found an additional year of education raised output per capita by an average of 4 to 7 per cent across OECD countries.

"To the extent that the government's proposal deters people from talking up higher education then that's a loss all round," Richardson said.

A spokesman for Education Minister Christopher Pyne said the OECD data showed that "in actual dollar value, the individual … benefit is greater than the economic benefit to the public".

However, Fairfax Media's analysis found the rate of return was far higher for the public than the individual.

For every public dollar put towards the cost of higher education, a man repays $6 through higher taxes and reduced unemployment benefits. By contrast, the man himself – who benefits personally from higher earnings and higher chances of employment – gets back only $3.20 for every dollar he pays for the cost of his education.

A woman in Australia repays $4.40 for every public dollar spent on her education while her private return is $2.50 per dollar.

At the same time, tertiary students in Australia already contribute far more towards the cost of their education – and receive far less individual benefit – than students across the OECD. Students in Australia contribute 55 per cent of the direct cost of their tertiary education (ie. tuition fees), compared to 30 per cent across the OECD, according to the data.

Education experts say moves by the federal government to cut public funding to higher education and increase the share of costs borne by students will exacerbate this disparity.

"At a certain point some people will opt out of higher education because they perceive it to no longer be a worthwhile investment," Tim Pitman from the National Centre for Student Equity in Higher Education said.

"Even further, it actually does become no longer worthwhile."

Gavin Moodie, adjunct professor of education at RMIT University, said the proposed cuts would see the government's share of spending fall from an already low 0.7 per cent of GDP – the second-lowest share among OECD countries and "substantially below" the OECD average of 1.1 per cent.

Increased costs for students could lower demand for tertiary education, particularly "in fields with low private returns, such as nursing and the helping professions", he said.